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    Efficient Portfolio Case Solution

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    Muhammad Aqib
    1) The document discusses selecting an optimal portfolio by investing in different mutual funds and securities to maximize return while minimizing risk. 2) It provides the expected annual returns, standard deviations of returns, and optimal weights for different mutual funds to create an efficient portfolio. 3) By adding a risk-free asset like government bonds and adjusting the weights, the portfolio can achieve different risk-return tradeoffs from a maximum return of 18.41% and risk of 12.82% down to a minimum risk of 0% and return of 8%.

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    Efficient Portfolio Case Solution

    Uploaded by

    Muhammad Aqib
    49 views4 pages
    1) The document discusses selecting an optimal portfolio by investing in different mutual funds and securities to maximize return while minimizing risk. 2) It provides the expected annual returns, standard deviations of returns, and optimal weights for different mutual funds to create an efficient portfolio. 3) By adding a risk-free asset like government bonds and adjusting the weights, the portfolio can achieve different risk-return tradeoffs from a maximum return of 18.41% and risk of 12.82% down to a minimum risk of 0% and return of 8%.

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    Efficient portfolio case solution

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    1) The document discusses selecting an optimal portfolio by investing in different mutual funds and securities to maximize return while minimizing risk. 2) It provides the expected annual returns, standard deviations of returns, and optimal weights for different mutual funds to create an efficient portfolio. 3) By adding a risk-free asset like government bonds and adjusting the weights, the portfolio can achieve different risk-return tradeoffs from a maximum return of 18.41% and risk of 12.82% down to a minimum risk of 0% and return of 8%.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    49 views4 pages

    Efficient Portfolio Case Solution

    Uploaded by

    Muhammad Aqib
    1) The document discusses selecting an optimal portfolio by investing in different mutual funds and securities to maximize return while minimizing risk. 2) It provides the expected annual returns, standard deviations of returns, and optimal weights for different mutual funds to create an efficient portfolio. 3) By adding a risk-free asset like government bonds and adjusting the weights, the portfolio can achieve different risk-return tradeoffs from a maximum return of 18.41% and risk of 12.82% down to a minimum risk of 0% and return of 8%.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    Q1)

    Answer:
    Because it is not a safe to invest whole amount in one security therefore, making a portfolio is
    considered safe investment. We invest in the stocks which has higher return and low risk and low
    correlation. We invest different amount in different securities in order to get optimal portfolio.
    I took,
    Reliance Equity Oppor - RP (G) MF5: With Expected return of 25.08% and Risk of 28.48%.
    ICICI Pru Exp&Other Services-RP (G) MF7: With Expected return of 25.89% and Risk of
    27.11%.
    I have selected MF5 and MF7 because both have maximum return among other assets because I
    want to maximize my return and if we change weighs the risk and return will move.
    Asset Annual Return SD of Returns
    Reliance Equity Oppor - RP (G) 0.250845407
    ICICI Pru Exp&Other Services-RP (G) 0.258907702

      Weights
    Portfolio Reliance Equity Oppor - RP (G) ICICI Pru Exp&Other
    1 100%
    2 90%
    3 80%
    4 70%
    5 60%
    6 50%
    7 40%
    8 30%
    9 20%
    10 10%
    11 0%
    Minimum Risk
    Maximum Return
    Q2)
    Here we are using excel to find the multi asset portfolio, so the results are,

    Return, weights and SD of single stocks.


    Annua
      l    
    Weight
    Fund Return s SD of Return
    ICICI Pru Focused
    22.43%
    Bluechip Eqty (G) 20.00% 21.47%
    Quantum Long-Term
    22.78%
    Equity (G) 0.00% 24.26%
    DSP-BR Micro Cap Fund
    29.08%
    - RP (G) 0.00% 37.49%
    SBI Emerging Busi (G) 23.60% 0.00% 33.79%
    Reliance Equity Oppor -
    25.08%
    RP (G) 0.00% 28.48%
    ICICI Pru Exp&Other
    25.89%
    Services-RP (G) 20.00% 27.11%
    HDFC Balanced Fund
    21.69%
    (G) 20.00% 20.01%
    HDFC Prudence Fund
    20.33%
    (G) 0.00% 25.25%
    Birla Sun Life GSec - LTF
    9.14%
    (G) 20.00% 5.32%
    R* Shares Golld ETF 12.90% 20.00% 16.01%

    Total weights   100.00% < =SUM(R15:R24)

    Return   18.41%

    Variance   1.64%
    Standard Deviation   12.82%

    Sharpe Ratio   81.198%


    Q3)
    If we add risk free asset with 8% annual return and no risk. Then risk and return profile of our
    portfolio will be,
    Weights
    Portfolio Asset 1 (Risky) Asset 2 (Risk Free) Sd Dev Expected Return
    1 100% 0% 12.82% 18.41%
    2 90% 10% 11.54% 17.37%
    3 80% 20% 10.26% 16.33%
    4 70% 30% 8.97% 15.29%
    5 60% 40% 7.69% 14.25%
    6 50% 50% 6.41% 13.21%
    7 40% 60% 5.13% 12.16%
    8 30% 70% 3.85% 11.12%
    9 20% 80% 2.56% 10.08%
    10 10% 90% 1.28% 9.04%
    11 0% 100% 0.00% 8.00%
        Max Return   18.41%
        Mn Risk (SD) 0.00%  

    As it shown in the table, if we increase the weight of risk-free asset in the portfolio then the
    expected return is decreases as well as risk also decreases. Investors can invest in any
    combination of these stocks.
    When risk is maximum the maximum return risk 18.41%
    And when there is no risk then the return is 8%.
    .
    Q4)
    Annua
      l    
    Weight
    Fund Return s SD of Return
    ICICI Pru Focused
    22.43%
    Bluechip Eqty (G) 20.00% 21.47%
    Quantum Long-Term
    22.78%
    Equity (G) 0.00% 24.26%
    DSP-BR Micro Cap Fund
    29.08%
    - RP (G) 0.00% 37.49%
    SBI Emerging Busi (G) 23.60% 0.00% 33.79%
    Reliance Equity Oppor -
    25.08%
    RP (G) 0.00% 28.48%
    ICICI Pru Exp&Other
    25.89%
    Services-RP (G) 20.00% 27.11%
    HDFC Balanced Fund
    21.69%
    (G) 20.00% 20.01%
    HDFC Prudence Fund
    20.33%
    (G) 0.00% 25.25%
    Birla Sun Life GSec - LTF
    9.14%
    (G) 20.00% 5.32%
    R* Shares Golld ETF 12.90% 20.00% 16.01%

    The above table has the information to invest in optimal portfolio.


    Return= 18.41%
    Variance= 1.64%
    Standard Return= 12.82%
    Sharpe Ratio= 81.198%

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